Lumber Capacity Has Peaked for 2025
Sawmill production has remained essentially flat over the past two years, according to the Federal Reserve G.17 Industrial Production report. The most recent data release contained an annual revision, which resulted in higher estimates for both production and capacity in U.S. sawmills. This revision shows current production levels above 2017 by 7.5% and an increased production capacity estimate peaking in the fourth quarter of 2024.
On a four-quarter moving average, production is 0.9% higher in the second quarter of 2025 compared to the first quarter. However, sawmill production remains just 0.3% above 2023 levels.
The current sawmill capacity estimate is down 1.2% from the first quarter of 2025. Despite this quarterly decline, capacity is higher than a few years ago. Compared to the second quarter of 2023, the estimate is up 4.5%. This is expected based on flat production over this period coupled with a declining utilization rate.
The sawmill utilization rate is a ratio of actual production and potential full production that is released quarterly by the Census Bureau. The utilization rate has experienced an overall downward trend since 2017 as a result of added capacity, yet stagnant production.
In the previous two years, lumber prices experienced declines as supply outpaced demand. Lower prices have led to sawmill curtailments and closures with excess lumber capacity, which may be why the capacity index started to show declines in early 2025.
Another notable trend is the continued declines in sawmill employment levels, with no strong impact on production levels. Some of this likely has to do with the technological advancements in place from new investment into sawmills resulting in fewer workers being able to produce higher levels of output.
Jesse Wade, NAHB director of tax and trade policy, and housing policy research, provides a look ahead to 2026 in this Eye on Housing post.